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Walmart Stock Alert: Buy the Earnings Dip or Steer Clear?

Walmart stock is getting crushed after reporting earnings. Here's the must-hold support area to watch now.

Walmart  (WMT) - Get Walmart Inc. Report stock is getting whacked on earnings, down 10% in Tuesday's trading session.

This is far from the reaction that bulls were looking for and given today’s decline, it likely far exceeds the worst-case scenarios that most investors may have been expecting.

That’s particularly true as many consumer-staples companies like Procter & Gamble  (PG) - Get Procter & Gamble Company (The) Report and Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report reported strong results and noted that inflation has not derailed its business.

Coupled with recession fears, many investors expected Walmart to do okay in that type of environment, should it come to that.

Instead, inflation results slashed into the company’s bottom line, as it missed profit expectations and was forced to reduce its outlook.

Some are taking a leap of faith with Walmart stock, while others acknowledge its ugly results but look at it as “tradable” from current levels. 

Indeed, there are some key levels nearby to keep an eye on.

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Trading Walmart Stock

Weekly chart of Walmart stock.

Weekly chart of Walmart stock.

When we look at the chart, we can see exactly what these traders are talking about. As we zoom out with a weekly chart, one can clearly see that the mid-$130s has been support for more than a year.

In 2021, it did break this area and trade down to $126.28. However, once Walmart stock bounced, it continued to find the mid-$130s as support through the rest of the year.

Should the stock continue to decline, keep an eye on the $132 level. That’s this year’s low and if it doesn’t hold as support, traders will likely look for a potential drop down to the 2021 low at $126.28 and a test of the 200-week moving average.

That area would be a reasonable risk/reward opportunity for bulls, particularly if we get an undercut of $126.28, a tag of the 200-week moving average and a bounce back through $126.28 (apologies on writing $126.28 so much).

However, that type of reversal could give bulls a great bounce opportunity.

Aggressive longs may consider nibbling in this mid-$130s region and looking for a bounce. If it doesn’t materialize, $132 is the key mark to watch.

If we do bounce, keep an eye on today’s high near $137.50. Above that opens the door to $140, followed by $144. Near the latter, I would expect quite a bit of resistance, at least in the short term.